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#1 26-05-2014 20:54:50

Admin & Trader
From: Paris - France
Registered: 21-12-2009
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Hedge funds increase their reliance on social networks

Hedge funds increase their reliance on social networks

Article by WSJ:

The opportunities presented by social media continue to grow for money managers, who are in a race to find ways to profit from troves of new data and its potential influence.

For a handful of large hedge funds, the focus has largely been on big data, say those at the funds and tech-industry experts. These funds, who are often largely quantitative managers, are taking years of social media data and attempting to see patterns between the data and asset prices. One example would be to see if increases in tweets about wanting to buy a car or home actually foreshadowed increased purchases.

But for those outside the deep-pocketed funds that can dedicate entire teams to look at social media data, a niche industry is attempting to serve money managers by curating social media for market-moving news and potential data clues. Within that set of firms, a select few companies have stood out, according to a recent white paper by Gnip, a firm that made a name for itself by analyzing TwitterTWTR -3.24% information and reselling it primarily to businesses. Twitter was so impressed, it purchased the data partner last month.

In the white paper, Gnip singles out Eagle Alpha, Hedge Chatter, Market Prophit and Finmaven as particularly strong at social media monitoring for financial professionals. These firms cancel out the noise of social media by focusing in on only posts and tweets that could move stock prices immediately (sometimes by accident, as with last year’s fake tweet from the Associated Press.) To show the burgeoning appeal of social media generally on Wall Street, Gnip notes Bloomberg and Thomson Reuters terminals have added filtered feeds from Twitter and other social media firms on trading platforms.

Gnip also presented a separate list of companies that provide social media analytics – a practice wherein the firms use the data presented by social media to learn more about companies or economies. The hope is that over time patterns and their potential relationship with asset prices can be ascertained, said Emmett Kilduff, founder and chief executive of Eagle Alpha.

Still, those within the burgeoning industry say some pitfalls are standing out. Among them, Wall Street firms broadly remain worried about the potential legal and ethical problems presented by social media and aren’t allowing financial professionals to use Twitter on a trading floor, for example. But by presenting social media in a read-only format directly on a trading screen, more and more trading firms are no longer ignoring its potential.

“Compliance is getting stricter by the day and if it’s not in the workflow, they won’t see it,” said Mr. Kilduff, whose firm launched in November 2012 and has recently seen an increase in event-driven funds as clients.

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